EXPERT OPINION: A Conversation with Tiffany Tomasso

Sunrise Senior Living has changed dramatically since the current Chief Operating Officer, Tiffany Tomasso, came on board, and the company is now one of the largest seniors housing operators in the country. Listen to Ms. Tomasso talk about the changes, the expansion into ancillary service businesses and integrating acquisitions from an operating perspective.

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Read the interview transcript: Steve Monroe: We’re here today with Tiffany Tomasso, Chief Operating Officer of Sunrise Senior Living, one of the largest seniors’ housing providers in the country. Tiffany, you are the COO of one of the largest companies in the country dealing with seniors’ housing. What keeps you up at night? Tiffany Tomasso: Steve, Sunrise pays me to worry, but I sleep really well at night. Sunrise is in a great place. I think the industry fundamentals are very positive. We have 40,000-plus team members that are very dedicated to the work that they do, to our mission, which is really to champion the quality of life for all seniors. We’re at a size and a scope today that we have the G&A, over $90 million a year that we can invest in people, in training, quality assurance programs, recruitment, leadership development – all focused on how do we make the life, the care and services that we’re providing to our residents in the communities the best that it can be. So while I worry, I feel pretty good about how I’m sleeping right now. Steve Monroe: So another Katrina, even though you did an unbelievable job of evacuating your residents, another Katrina doesn’t worry you, especially with this big hurricane season we were supposed to have, that didn’t materialize? Tiffany Tomasso: Well, we didn’t have it, and you have to as a leader of any size organization, when you’re in a 24/7 business, you need to surround yourself with the right people at every level of the organization. If there’s one thing that I’ve seen in my 20-plus years in healthcare, and particularly my almost 14 years with Sunrise, we have been very, very fortunate in the types of folks that we’ve been able to attract. We are very committed to growing and developing people from within, so our executive directors and many of our folks on our area teams have worked in communities, have been with the organization a long time; and if I didn’t have the confidence in, really, the people that we have hired, that are building their careers here, I’d probably worry a little bit more. But I think hiring the right folks, and then the systems and the infrastructure to support them and help them grow, as I said, allows me and really all of us to sleep well at night. Steve Monroe: How many of them have your home phone number? You don’t have to answer that, just kidding. Tiffany Tomasso: I’m pretty accessible, let’s put it that way, but no one abuses it. Steve Monroe: During your tenure as COO, Sunrise as we know has evolved from basically a traditional assisted living company to now you are a broad-based senior care company with assisted living, independent living, CCRC’s, hospice care, home healthcare. What’s been the hardest part of that evolution from an operating perspective? Tiffany Tomasso: It’s been great to be able to be a part of this, as I said, for almost 14 years now, to really evolve and be a part of the evolution of this organization as the sector has grown and really matured. You mentioned that we’re in other aspects of senior housing today. When I joined Sunrise 13 years ago, independent living was a component of what we did. Obviously it’s a slightly larger component of what we do today than it was then, but it wasn’t new to us. We’re in the hospice space now with a recent acquisition, but partnering with hospice organizations has been an element of our residence [inaudible 3:43] model from even before I joined, when Paul and Terry first started the company. It’s been great to be able to see how we’ve stayed very true to the mission of the organization, which is how do we create the highest-quality environments, the highest quality of services and programs for the residents of our communities. It’s been fun to see how you do that in communities that we have developed and built, to communities that we’ve acquired, to those that we’ve managed, and obviously now moving into the hospice business, it will be a lot of fun to see how do we integrate those two businesses more fully. Steve Monroe: Has that been difficult? Tiffany Tomasso: “Difficult” is the wrong word. I’d say there are always challenges to growth, but I think the challenges of growth are probably better than the challenges of downsizing. Fortunately I’ve not had to be a part of that. So I would say it’s probably been more fun, energizing, and the size that we’re at today and the scale that we’re at today, growth is easier at this size than it was, say, back in the mid-nineties, when with one acquisition we essentially doubled in size, so – Steve Monroe: Sure, much less dramatically when you do a transaction. And talking about growth, you’ve obviously been expanding your menu of services, but you’ve also been expanding in Europe. As COO, have you been actively involved in that European effort? Tiffany Tomasso: Yes, I have. We first started exploring expansion into Europe, and particularly the U.K., in the late nineties, and we opened our first community there in 1999. We have 12 communities operational at the end of a year in the U.K. today, and we opened our first in Germany last year. So it’s been great to be able to take this platform that we’ve seen work here, this model, and see it really embraced there in Germany and England. Steve Monroe: Any expansion plans for France or Spain? Tiffany Tomasso: We’re always looking for opportunities to expand, but right now the real focus is on England and Germany. Steve Monroe: Is there any difference – I mean, you’ve been in the business for a long time – between assisted-living in Europe versus assisted living here? Tiffany Tomasso: What was most interesting and maybe the most surprising was really how similar they were. If you were to look at the market conditions in England today and in Germany, it’s like looking at the U.S. from the mid-eighties to the mid-nineties: high concentration of institutional options, and then independent living, but virtually nothing that would be kind of the residential high-quality alternative to a nursing home. So the market conditions were very favorable. The demographic trends are very similar, and that’s the opportunity that we saw. With the years of operation that we’ve now had in the U.K. and more recently with Germany, what the 45- to 64-year-old adult daughter wants here in North America is exactly what they want in England and Germany: high-quality residential options for their parent; and it’s been great. Now, some of the differences are what you would expect. There are some slight regulatory differences. You’ve got cultural differences regarding labor law. But you know, the United States is one country, but there are nuances and differences in every state that we operate as well. So I think the similarities are much more compelling than any of the differences, and our model is working. Steve Monroe: Good. Now, Sunrise launched Sunrise at Home several years ago, to home health business in several of your – I think a lot of your original key markets. Then you joint-ventured with a hospice provider to bring hospice into your facilities. Now you’ve just bought a hospice provider very recently. There’s obviously a trend here in getting into the ancillary businesses, and it’s a natural progression that I think – I’m surprised, actually – that other senior care providers have not done. Do you expect to expand your home health business on top of all this? Tiffany Tomasso: We’re not in the Medicare home-care business at all. Our Sunrise – Steve Monroe: It’s 100% private pay? Tiffany Tomasso: A hundred percent private pay. We are in eight of our markets, and we really saw that as a vertical integration model: how could we provide essentially assisted living services to seniors in their homes before they moved in. If you were to talk to any major operator, they’d say who their biggest competitor is, is home. Seniors don’t want to move. They want to stay home as long as possible. So we saw the move into private-pay home care as really the opportunity to get Sunrise in the mind of the consumer before they actually made the decision for senior living. So we’ve been in that space now for several years. We’re in eight markets, and I don’t know that we’ll be looking to expand it. We’re looking really to kind of maximize it in those markets. Steve Monroe: And with the acquisition of Trinity Hospice, how soon do you think you’re going to be able to roll out your own hospice program in your own facilities, under your name? Tiffany Tomasso: Currently Trinity is in 24 markets and we are in seven overlapping markets, so plans are underway right now how to bring the Trinity services into those Sunrise communities. Our plan for expansion into the other markets, as we’ve announced previously, is that over the next 24 to 36 months we’ll be bringing the trinity services into the major metro markets in the U.S., so that plan is underway right now. Steve Monroe: Okay, good. Is there anything beyond home health, hospice and other ancillary-type services you think you might get into? Tiffany Tomasso: We’re always looking. We’re always looking to say, what else can we be doing; how can we better serve the seniors in our communities, so we’re open, is the best way to say it. Steve Monroe: So anything is game out there in the acquisition market. Tiffany Tomasso: Anything is game. Steve Monroe: I know the assisted living industry has always been touted as – I know when Paul and Terry first started Sunrise, you were a private-pay business, and when you went public, it’s, “We’re private pay, we don’t have to worry about government reimbursement.” As you expand in areas like hospice, which is generally about a 90, 95% Medicare business, how does that affect you? It’s small right now, but are you worried about that Medicare risk going forward? Tiffany Tomasso: Again, “worry” is an interesting choice of words. It still represents less than, today, 10% of our revenue stream. We’re going to continue to grow. The private pay, senior business development continues to be the single biggest growth drivers for us. And the fact that we’re serving seniors, every one of them is a Medicare beneficiary, so the more that we can look to, either directly or partner with others to enable them to access that benefit and the services that they’re entitled to, I think that it strengthens us as a provider, and ultimately kind of our business model long term. So I see both elements growing, but the private pay I think will continue to be the largest component of what we do. Steve Monroe: So Medicare is not keeping you up at night. Tiffany Tomasso: No. No. We’ve got good people. Steve Monroe: Some people think that, especially as this business expands, that staffing is going to be the biggest challenge for all senior care providers over the next several years, and we hear that employee turnover is just high industry-wide. What are you as COO doing, one, to attract good employees, but more importantly to keep them? Tiffany Tomasso: I think this is where size really works and benefits really the team member and the organization. We’re able to do more today in terms of training programs, development programs, recruitment, focusing on retention. Some of the things we’re doing, we’ve always done employee satisfaction surveys. Two years ago we partnered with Gallup, and we’re now measuring employee engagement, which really gets to a much higher level of how satisfied and how aligned are the team members, particularly the front line, with the mission and the goals of the organization. So that’s one tool, one real focus area and a tool that we use to look at that. Training programs, we’ve always had very robust training programs. We evaluate them regularly, add curriculum to that, and we’ve also been very open and candid with our team that our commitment is to grow our talent and our leaders from within. So we have a high success rate of promotions from within: department heads to executive directors through our executive director training program; executive directors to our area positions; and then in the frontline positions from caregivers – we have a tuition reimbursement program that enables folks to go back to school. A large percentage of our workforce is part time. It comes with prorated benefits including tuition reimbursement. So I think we do a lot. We offer a great culture and environment, and then we made a real investment in the team, because at the end of the day, that’s the foundation of the organization. Steve Monroe: Stock options for executive directors? Tiffany Tomasso: We do long-term incentive programs for executive directors, so, yes, we do. Steve Monroe: That’s a key thing. The company’s been doing a fair amount of acquisitions. As COO, what’s the hardest part of integrating, be it a small acquisition or a large acquisition? Is it the culture? Is it staffing? What is difficult about that from the operating perspective? Tiffany Tomasso: In any acquisition, culture is always the most challenging. First you have to get through the “me” factors: how is this going to affect the individuals that are in the acquired company. I think if you go out and are very open – we have learned that communication up front, frequently, early on, allowing for two-way – kind of allows that anxiety to subside. Be able to share as much as you can share, and as soon as you can share it. But the cultural integration is the most challenging. I think it’s also the most rewarding. That when you can get individuals excited about the mission – and in this case we’ll say Sunrise – and that history and where we’ve come from, and more importantly, the vision of where we’re going, we have found that people love to get behind that. The other similarity is in senior living, people are attracted to this field because they want to serve, and so we have found that the folks in the communities that have been acquired really love being a part of a larger organization in some cases, and have really gotten behind our mission and what we’re all about. But that’s probably the largest challenge that we face. Steve Monroe: Finally, sometimes do you ever feel like asking your CEO, Paul Klaassen, to slow down the growth of the company, to give you a breather? Tiffany Tomasso: If I’ve thought about it, I haven’t asked! So, no. As I said earlier, it is easier today to grow on the platform from where we are today than previously. We have unbelievably dedicated folks with a lot of commitment. The industry dynamics are very, very favorable and I think it’s a great time to move on that front. There may have been a few times in the earlier years that I said, “Can’t we just slow down for a few months?” But not anymore. I think it’s just great. Steve Monroe: So when Paul comes up to you and says, “We’re going to buy Brookdale Senior Living now,” you’re not going to choke ? I’m only kidding; I know that’s not going to happen. Anyway, thank you very much for joining us today, Tiffany. Tiffany Tomasso: Thanks a lot.